As revealed by HSJ in December, the trusts scrapped the procurement due to “uncertainty and risks” in the wake of the Grenfell Tower fire.

Seventy-one people died and at least 70 more were injured in the fire at the tower last June.

Ryhurst is a subsidiary of the Rydon Group, which was the lead contractor overseeing the refurbishment of the tower between 2014 and 2016.

Shortly before the fire happened, Ryhurst was named as the preferred bidder to become the trusts’ strategic estates partner.

Under the partnership, capital projects between the value of £40m and £120m would be developed across the two trusts.

But at a hearing in the Technology and Construction Court on Friday, Sarah Hannaford, representing Ryhurst, said the company was told the trusts did not wish to contract with them because of the “link to Grenfell and the public criticism that might then arise”.

Ms Hannaford said Ryhurst believes this was an unlawful decision and said the trusts had breached the Public Contracts Regulations 2015.

Unless the parties agree a settlement, the case will go to full trial.

March board papers from Countess of Chester show the trust forecasting a £3.1m deficit for 2017-18.

Neither trust would comment while the case is active.

Stephen Collinson, managing director of Ryhurst, told HSJ: “We felt that the contract was awarded to us as a successful company operating in the strategic estates market and the actions of the trusts fell short of the standards we would expect in a procurement of this type.”

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